Asian equities weakened slightly on Thursday as soaring COVID cases in China unsettled investors and cast doubt over chances of a swift recovery for the world's second biggest economy after the relaxation of stringent COVID curbs.
Concerns that central banks' efforts to tame inflation could lead to an economic slowdown and the uncertainty over how China's economy will fare following the removal of COVID controls have kept markets subdued.
Marvin Loh, senior macro strategist at State Street Global Markets, said investors' risk appetite has continued to weaken this month, with the decline most pronounced in North America on growing recessionary concerns.Markets are now pricing in 69% chance of a 25-basis point rate hike when the U.S. Federal Reserve holds a policy review in February, and they are now looking at U.S. rates peaking at 4.94% in the first half of next year.
PineBridge Investments strategists said the lagged effect of aggressive central bank tightening has left most anticipating a softish recession in the second half of 2023. The yield on 10-year Treasury notes was down 2.2 basis points to 3.864%, not far off six-week high of 3.89%.
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